EUR/GBP could test 0.90 in the near term – Danske Bank

Kristoffer Lomholt, Senior Analyst at Danske Bank, sees the European cross attempting a test of the 0.90 handle in the short term.

Key Quotes

“With EUR/GBP above the 0.87 mark, potential for GBP strength remains in place should the election outcome provide May with a clearer victory than hinted at by recent polls as sterling markets appear increasingly in recent weeks to have priced in the risk of a less agile May government”.

“We maintain the view that if Theresa May consolidates her majority substantially it would be GBP positive, and we look for EUR/GBP in a trading range of 0.82-0.8650 in this scenario”.

“If instead the Conservatives remain in power with an unchanged majority, we expect a relief rally in GBP, targeting EUR/GBP at 0.84 post the election”.

“Finally, should the Tories lose their majority but remain in power (hung parliament), we expect a kneejerk bounce in EUR/GBP for a possible test of 0.90. We see levels above 0.88 in the cross as attractive for entering bullish GBP positions for the longer term”.